DEMAND for the Bangko Sentral ng Pilipinas’s (BSP) term-deposit offering on Wednesday surged, as banks continued to flock back to the Central Bank (CB) after meeting the country’s liquidity needs during the holiday season.
Data from the BSP showed oversubscription anew across all tenors on Wednesday, the second consecutive week all three tenors were oversubscribed.
In particular, banks tendered a total amount of P35.34 billion in the seven-day term-deposit facility (TDF) on Wednesday, exceeding the P20 billion offered by the Central Bank during the week.
Similarly, the total bids in the 14-day facility was at P23.297 billion—also exceeding the P20 billion offered by the BSP during the week.
The two faciltiies were still oversubscribed despite the already higher offered volumes in the seven-day and 14-day facilities compared to the first week of January this year. Both facilties were doubled in volume from P10 billion in January 2 to P20 billion on Wednesday.
The volume of the 28-day TDF has been unchanged at P10 billion.
The oversubscription trend, nevertheless, continued in the 28-day TDF, where the amount tendered hit P14.877 billion on Wednesday, surpassing the P10 billion offered by the BSP during the week.
Toward the end of December, the BSP started reducing the volumes of the term-deposit offerings as demand from banks fell during the holiday season. BSP officials said banks chose to remain liquid during Christmas to service the needs of their clientele for the holidays. The TDF is one of the BSP’s liquidity absorption facilities to manage circulation in the economy.
As banks bid to park funds in the BSP’s facility, the TDF effectively siphons off a part of this structural liquidity from the financial system to bring market rates closer to the BSP’s main policy rate.
On Wednesday, the rates of the three facilities showed mixed movement.
Yields for the seven-day facility hit 5.0706 percent on Wednesday, down from the 5.0784 percent seen in last week’s auction. This is contrasting movement compared to the two other facilities, as the 14-day TDF yield hit 5.1530 percent, up from the previous week’s 5.1319 percent.
For the 28-day facility, the rate hit 5.1644 percent during the week, also up from the 5.1672 percent in the previous week. The BSP’s main policy rate currently stands at 4.75 percent. For next week, the BSP retained the volumes across all tenors.